Settlement rules on commodity options soon

No cash settlement here, expired options devolve into futures; Sebi still working out details

The Securities and Exchange Board of India (Sebi) on Wednesday approved trading in commodity options. 

Actual trading in commodity options will take some time to start as the finance ministry will have to amend the relevant rules, which can be done by issuing a notification. The Securities Contracts (Regulation) Act empowers Sebi to allow commodity options, however, the settlement of commodity options is more complex than equity options.

“Options will expire and devolve in futures the same commodity and not cash settlement like in equities,” Sebi Chairman Ajay Tyagi said, adding details for this were being worked out. 

Once a commodity option expires